Iflix fire sale, Byju’s busy and the Jack Ma-Masa Son feud

Asia Tech Review: 29 June 2020

Welcome back,

Everyone is talking about Iflix this week after it got acquired, but I’m not so sure the deal itself is actually that significant—other than ending the drama over Iflix’s future.

Speaking of drama, there’s plenty more to be found this week: Luckin is on the verge of yet more chaos with a delisting from the Nasdaq imminent, while Jack Ma and Masayoshi Son are feuding. Over in Southeast Asia, Lazada denied it hired a new CEO is because it can’t keep up with the competition.

And finally, a quick personal plug. We’re hiring a reporter for The Ken Southeast Asia, its the first role we’ve opened since we launched three months ago. Full details here.

See you next week,

Jon


Iflix spared but far from glorious

Southeast Asia has been buzzing with news that Tencent’s WeTV business bought Iflix in an undisclosed deal. Iflix has been on the ropes for some time—in the last year alone it has sold off its Africa business, undertaken multiple rounds of layoffs, paid for content deals using stock and aborted an IPO in Australia—and it got to the point of either selling or liquidating. I’ve heard the price is $20M-$60M, but either way it is far from the $1B Iflix previously shot for from investors and is said to have targeted for its IPO (lol).

I don’t have much more to add at this moment but:

  • This is not the landmark exit Iflix management had envisaged when they started. In fact, it is unlikely any investor sees any return at all. Further, Iflix still owes a lot of content companies money and apparently the terms of this deal may not see them get paid. Those who took their IOUs in shares will also not see a return due to the structure of the deal—Iflix transferred its assets to a new entity and it is that which has been sold.

  • There’s no Midas touch. WeTV hasn’t done much in Southeast Asia yet having only entered Thailand. Yes, Tencent is behind it but Southeast Asia is a tough nut to crack. This deal looks like a no-brainer for Tencent to grow its reach by adding WeTV/Chinese content to Iflix (and countries) and roll out their tech stack but this is hardly a major acquisition. (Like, say, iQiyi.)

  • It is still game on. WeTV-Iflix faces plenty of competition from a variety of rivals including: China (iQiyi nabbed Netflix’s Asia head and there’s Mango TV), global players (HBO quietly arrived in Southeast Asia this year, Hotstar is coming soon, Netflix and Amazon Prime are here now) and then there’s indie player Viu, which outlasted Iflix and Singtel’s recently-shuttered HOOQ service.

On to this week’s news.


China

Drama boiling over

Luckin is delisting from the Nasdaq after it dropped its appeal to remain after receiving two warnings from the exchange following a $300M sales fraud. Luckin’s board is forcing chairman Lu Zhengyao to resign while Lu himself is moving to have independent director Sean Shao terminated. A shareholder meeting to discuss these decisions and more is set for 5 July, although a 2 July meeting will take place first to decide Lu’s future. Very messy.

One in, one out? Online property site Beike is bucking the trend for local IPOs by heading to New York to list. Beike counts Tencent and SoftBank as its investors and it is aiming to raise $2B.

Still the local listings continue with Cambricon, one of China’s most valuable artificial intelligence chipmakers, planning to raise $400M on China’s Star Market. At the same time, there are concerns that an ‘arms race’ between the US and China is creating a bubble around the valuation of chipmakers, as Reuters reports.

Investors have pushed the share prices of the country’s 45 listed chipmakers to over 100 times the companies’ earnings, making semiconductors the priciest sector in the stock market.

There is also a scramble for pre-listing deals, as venture capitalists once focused on consumer internet companies turn their attention to chips. Such investment in the sector almost doubled to 22 billion yuan ($3.11 billion) in two years through 2019, showed data from Zero2IPO.


India

Wheeler dealin’

Edtech startup Byju’s has been busy. The company announced an investment from Bond—the VC firm from high-profile US investor Mary Meeker—at a reported valuation of $10.5B, that’s double what it was worth one year ago. The deal may be part of a larger $100M round that Byju’s is reportedly raising.

Later in the week, reports emerged that Byju’s is in talks to snap up edtech startup Doubtnut, a two-year-old company that graduated Sequoia’s inaugural Surge accelerator program. TechCrunch pegs the deal at $125M-$150M which is a lot for a young company. Both startups share Sequoia (and Tencent) as investors, though the deal is apparently not done yet.

Doubtnut has grown popular in tier 2-3 cities in India as a way for children to learn during the pandemic. So popular that it seems it attracted the attention of another edtech in India—Unacademy—which reportedly held preliminary acquisition talks that fell through.


Southeast Asia

New fighter, same fight

Lazada has a new CEO, he’s Chinese and most recently led Lazada in Indonesia having previously spent time with Alibaba in China. (And, yeah, his name is Chun Li.) Reuters reports the change was a reflection of Lazada’s struggle to compete with Shopee.

The change was made after a middling performance from the e-commerce firm, two sources with knowledge of the matter told Reuters, declining to be identified as they were not authorised to speak to media.

A Lazada spokesman said there was “no truth to this statement” and the company rejected what it called an unsubstantiated assessment of its performance.

Irrespective of the why, Lazada said Li’s appointment will mean a sharper focus on Indonesia and technology, two areas where he is said to have had significant influence. Lazada has been caught between its old culture from Europe (it began as a Rocket Internet company) and new culture from Alibaba. This hire certainly appears to increase alignment with China.

Japan

In billionaire feud news: Masayoshi Son is stepping down from the Alibaba board one month after Jack Ma left the SoftBank. That’s tit-for-tat after years of partnership and huge returns from their efforts together. SoftBank’s early investment in Alibaba made over $100 billion. Ma quit the SoftBank board in May after its most recent financials, including a torrid run for the Vision Fund, were released.

Japan has been overlooked by global VCs for some time but now Sequoia is eyeing investments in the country as it sees opportunities around digitisation. It isn’t, however, setting up a local office or fund yet:

Sequoia plans to cultivate the Japanese market through its Chinese office for the time being. At first, it will provide funding to Japanese venture capital firms with which it has partnerships. A source said it plans to "decide on projects sometime within between half a year and a year."


Korea

An external review panel in South Korea recommended that prosecutors should not indict Samsung Group heir Jay Y. Lee over a 2015 merger and alleged accounting fraud. Elsewhere, Samsung denied reports that it plans to move much of its display production from China to Ho Chi Minh City in Vietnam this year.

Korea will launch a $825M fund designed to help local media and content companies compete with global giants like YouTube and Netflix 


International

Amazon is reportedly acquiring self-driving car startup Zoox for over $1B link

Uber’s fintech strategy appears over after less than a year—no super app strategy for ride-hailing’s OG

The Wirecard scandal is a crazy mess that’s dragged in other financial services companies, EY, and regulators across the world—too much to summarise briefly but the FT, which first broke news and has doggedly followed developments, has a long list of stories


Last week on The Ken

We publish one story for each of our subscriptions each week, here’s a recap what we ran over the last week:

Southeast Asia

India

You can sample more stories on our free reads page.


You just finished reading Asia Tech Review, the weekly newsletter for keeping up with the tech industry across Asia.

If someone sent this to you, you can sign up for free at Asiatechreview.com